MICA Weekly Legislative Update #14

The legislature adjourned just after midnight, less than an hour ago. The work over the weekend was highlighted by the passage of the modernization bill, a bonding bill, a Health and Human Services bill that included one time funding for implementation of the Minnesota African American Family Preservation and Child Welfare Disproportionality Act as well as a smaller appropriation to partially address the first year of increased costs from HR1 related to SNAP, a tax bill, and other omnibus bills. MICA will be sharing an end of session report with much greater depth later on but I wanted you to have this in your inbox as a quick update for the major bills related to counties and county priorities in the final hours of the session.

At a high level the number of last minute changes and convoluted paths bills took to passage was undeniable. It was not a transparent process. But it’s also true that the legislature accomplished more than most assumed it would, especially given the divided government when you look at recent comparisons from other election years like in 2022, 2018, or 2016.  

The IT Modernization bill authored by Rep. Paul Torkelson and Sen. Melissa Wiklund moved as a stand alone bill, finishing before the larger omnibus bills which moved closer to midnight. The bill establishes a new state fund to modernize the information technology systems used by state agencies, counties, and Tribal Nations to administer human services programs. Before spending money appropriated by the legislature from this new fund, the Department of Human Services, the Department of Children, Youth, and Families, and the Department of Information Technology Services are required to consult the new advisory council which has four seats reserved for county representatives. The bill appropriates money for specific county and agency IT modernization projects, avoiding issues previous appropriations ran into which used overly broad language. It includes a Senate provision which establishes a bicameral legislative commission on human services system modernization, to build IT issue expertise and provide more oversight of system changes made at the council and agency level. The overall investment is $75 million this biennium and $15 million in FY 28-29, but with the ability for future amounts up to $50 million to potentially be placed in the Human Services Modernization Fund. It passed the House 134-0 and Senate 67-0.

The HHS bill was one of the last bills to move this year, passing the House 108-26 and the Senate 35-32. Related to SNAP there is $10,728,000 in FY27 for an allocation to counties for SNAP administrative costs. The commissioner must allocate money under this section to counties based on each county's proportional share of SNAP administrative costs in the most recent year for which data are available.

Related to the Minnesota African-American Family Preservation and Child Welfare Disproportionality Act, $15 million was appropriated in FY 2027 on a one-time basis. Funds received must be used to address staffing and services needed for child protection and expansion of child protection services, including making active efforts to prevent entry into the child protection system, prevent out-of-home placement, reunify children with families, and finalize alternative permanency arrangements if reunification is not an option. Funds must not be used to supplant current county expenditures for these purposes but may be used to maintain staff and services paid for by temporary funding.

Because the money is one-time and there is no funding for the agency, the case review process is delayed until July 1, 2027. The working group expires December 31, 2026.

Among many other changes the bill also provides annual stabilization payments to Hennepin Healthcare and creates a task force on governance and financing moving forward.

The tax bill remained in limbo later in the day, with the final product being a relatively small bill, including provisions to reach the targets set by leaders (a $24 million reduction in revenue in FY 26-27 and an increase by $342 million in FY 28-29). Despite the fact that a tax bill did not pass the House (meaning the Senate didn’t pass a bill off the floor either) an agreement was dropped in a last minute conference committee that was originally formed to resolve differences in the 2025 transportation policy omnibus bills. The final agreement on the tax bill was relatively narrow in scope compared to many omnibus tax bills, clocking in at 103 pages. For the most part almost no policy items were added to the bill beyond what the committee had loosely agreed to on May 12. Significant provisions for counties include a four year extension of local homelessness prevention aid (that was scheduled to sunset after 2028) and a one time 14.9% increase to the homestead credit refund that will go out to those that receive a refund later this year. That refund is paid out of the state general fund and will not impact county budgets, its overall cost to the state is $125 million in FY 2027 only.

Other notable provisions that drew a lot of attention throughout the year included a two year extension to the pass through entity tax and credit, which provides a federal tax cut for Minnesota businesses as well as an extension of the Sustainable Aviation Fuel tax credit. The bill included some last minute surprises as well, like a nuclear energy study that the Department of Commerce needs to submit by January 30, 2027 as well as a $75 million transfer from the driver and vehicle services operating account to the general fund to help pay for various one-time costs like the property tax refund.

The bill quickly passed the House on a 126-8 vote. In the Senate Sen. John Jasinski raised concerns about $75 million driver and vehicle services transfer saying he would rather see those funds go to deputy registrars. Sen. Bill Weber said he was voting green despite the lack of local sales tax projects that the House objected to. The bill passed the senate 52-15.

After the session ended, leaders from different parties emphasized wins they valued and things left on the table. Senate Minority Leader Mark Johnson touted the one time tab fee reduction but said that Senate Republicans would need to take the majority in order to make the change permanent. House DFLers focused on the passage of a bonding bill and funds passed to save Hennepin Healthcare, while saying the lack of changes related to gun laws was a disappointment. House Speaker Lisa Demuth said the biggest accomplishment was the passage of the OIG bill while also highlighting the work that Rep. Paul Torkelson did on bringing systems modernization across the finish line. The Senate DFL is expected to provide their end of session presser on Monday morning.

As always, near the end of session process became a story, especially after Senate Majority Leader Erin Murphy was critical of the process and how many decisions were made outside of the public eye this session. Both House Speaker Lisa Demuth and House DFL Caucus Leader Zack Stephenson were defensive of the process, saying that while it was not perfect that most of the bills that moved last minute had been heard in some form prior to the final day of session.

The Governor is expected to take action on the bills in the coming days. The House and Senate will hear speeches from retiring members on Monday. We will have additional detail on these and many other bills that will go out with our end of session report. If you have any questions don’t hesitate to reach out to me directly or anyone on our team.

Thanks,

Nathan